Sparta Commercial Services Reports 22% Revenue Decline, Faces Liquidity Challenges

Sparta Commercial Services, Inc. reported a total revenue of $89.4 million for the six months ending October 31, 2024, a decline of 22% from $114.7 million in the same period last year. The company attributed this decrease primarily to a 37% drop in information technology revenue, which fell to $62 million from $98 million, largely due to reduced mobile application fees. Wellness product sales also decreased by 6%, while merchant financing revenue increased by $16.1 million, contributing to the overall revenue mix. The gross profit for the period was $76.1 million, down from $91.6 million in the previous year.

Operating expenses rose significantly, totaling $748.8 million for the six months ended October 31, 2024, compared to $619.9 million in the prior year, marking a 21% increase. This rise was driven by higher compensation costs, which increased by 29% to $388.2 million, and a substantial increase in consulting fees, which surged by 414% to $179.4 million. The net loss attributable to common stockholders for the six months was $1.38 million, compared to a loss of $575,734 in the same period last year, reflecting the impact of increased operating expenses and changes in the valuation of derivative liabilities.

In terms of operational developments, Sparta's total assets increased significantly to $635.9 million as of October 31, 2024, from $119.7 million at the end of April 2024. This growth was primarily due to the addition of loans receivable amounting to $523.8 million. The company also reported a total of 37,863,288 shares of common stock outstanding as of December 23, 2024, up from 29,495,189 shares at the end of April 2024. The increase in shares reflects ongoing efforts to raise capital through equity financing.

Sparta's management is actively pursuing additional financing options to address liquidity challenges, as the company reported a working capital deficit of $9.8 million and an accumulated deficit of $68.2 million. The company has engaged a financial advisory firm to assist in raising capital and is exploring various financing avenues, including debt and equity investments. However, there is no assurance that these efforts will be successful, and the company has indicated that it may need approximately $1 million in additional funding to support operations over the next twelve months.

Looking ahead, Sparta's management remains focused on developing profitable operations and addressing its liquidity issues. The company is also working on expanding its product offerings and enhancing its service capabilities across its business sectors, which include financial services, e-commerce, mobile technology, and health and wellness. However, the ongoing net losses and the need for additional financing raise substantial doubts about the company's ability to continue as a going concern in the near future.